Fast & Festive

Festival cheer puts India's auto market back in motion. Can the momentum last?

- HIMANI KOTHARI

THE AUTO INDUSTRY HAS something to celebrate after a year of lull. The festive season, stretching from Navratri to Diwali, brought a rush of buyers back to showrooms, lifting sales across the country's top automakers and providing much-needed relief to an industry that has seen sales shrinking for several months.

The Federation of Automobile Dealers Associations (FADA) expects retail sales to grow in high double digits in the festive season. “We take a 42-day festive period, from Day 1 of Navratri to 15 days post-Dhanteras. The current run rate is showing 20 to 25 percent growth in retail (sales) over last year’s festive season,” Saharsh Damani, CEO of the dealers’ body, tells Forbes India.

This is in sharp contrast to the story so far. In the first half of the ongoing fiscal, passenger vehicle sales contracted by 1.4 percent to 20.5 lakh units, according to the Society of Indian Automobile Manufacturers (SIAM). Last year saw sales growth fall to a four-year low of around 2 percent. The festive season typically accounts for 30 to 40 percent of annual sales in the world's third-largest car market.

WHAT'S DRIVING DEMAND?

The recent surge has been driven by a mix of Goods & Services Tax (GST) cuts, pent-up demand spilling into the festive season, and an overall improvement in consumer sentiment. GST on small cars has been reduced to 18 percent from 28 percent earlier. This came into effect on September 22, coinciding with the start of Navratri.